Push to Legalize Internet Poker Could Give U.S. Casinos Share of $25 Billion Pie

Dec. 6, 2010— -- Poker has been played by presidents and partisans alike for generations. But until now, lawmakers on Capitol Hill have tried to inhibit millions of Americans from participating in the popular game with other players online.

More than 2,000 websites currently offer users the chance to wager real cash in games of skill and chance, including poker, according to the American Gaming Association. But most of them are run by offshore companies, industry experts say.

Now some lawmakers want to allow U.S.-based casino companies to get into the game -- and a cut of the $25 billion-a-year pie -- by quietly pushing for a change in the law before the end of this year.

A draft bill, first reported by the Wall Street Journal and obtained by ABC News, would legalize online poker playing in the U.S., and establish licensing and reporting requirements for companies, as well as safeguards for consumers. It would also generate tax revenue from wagers, for state and federal governments.

Forms of online gambling other than poker would remain prohibited under the bill.

Legalization of online poker forums has long been sought by the U.S. casino industry which says federal gaming regulations have unfairly handicapped their business in a flourishing online marketplace and left American consumers vulnerable.

"There are no consumer protections, no standards for licensing, no rules on operations," said Alan Feldman, a spokesman for MGM Resorts International, who noted internet gambling is widespread across the U.S. despite federal law.

An estimated 15 million Americans play online poker for money through sites run out of foreign countries, according to the Poker Players Alliance.

"We're very strictly regulated. But then in the online space, there are all these unregulated, unlicensed, untaxed groups running internet gaming," Feldman said.

Gary Thompson, spokesman for Caesars Entertainment Corp., the country's largest gaming company, said he could not comment on the bill because of an SEC-mandated "quiet period," but acknowledged the industry has favored a change in the law.

Gamble on Online Gaming No Safe Bet

The Unlawful Internet Gambling Enforcement Act of 2006 indirectly outlawed online gambling in the U.S. by making it illegal to use a credit card or checking account to place electronic bets.

But the industry has repeatedly lobbied Congress to clarify the rules and loosen restrictions on some forms of online gaming, including poker.

After the midterm election, in which Las Vegas-based casinos were some of the major donors to the reelection of Nevada Democratic Sen. Harry Reid, some speculate the legislation stands a renewed chance at passage.

That prospect has several leading Republicans -- who are opposed to legalization of internet gambling without public hearings -- up in arms.

"It's a sloppy wet kiss to Nevada casinos," said a senior Republican staffer familiar with the legislation who asked to remain anonymous.

Republican Reps. Spencer Bachus of the House Financial Services Committee, Dave Camp of the Ways & Means Committee, and Lamar Smith of the Judiciary Committee sent a letter to Reid and Senate Minority Leader Mitch McConnell last week opposing the measure, which was being circulated quietly on the Hill.

"We have heard reports that certain interests might be pushing to attach such a bill to a 'must pass' measure because they have calculated that a secretive, closed-door, undemocratic process represents their best opportunity to regain access to the U.S. market," they wrote.

"Creating a Federal right to gamble that has never existed in our country's history, and imposing an unprecedented new tax regime on such activity, requires careful deliberation -- not back-room deals or earmarks for special interests," the letter continued.

Reid's office declined to comment on the bill or its prospects in the final weeks of the year.

Still, some sources close to the legislation acknowledged that the broad mix of constituencies pushing for greater government control of an industry that has operated in the shadows, may help it succeed as an attachment to a larger piece of legislation.

"Licensing and regulating online poker is the most effective and responsible way to ensure the online safety of America's children and consumers," said Parry Aftab, an internet privacy and security expert who has testified before Congress on the need for legislative reforms.

"Given the growing popularity of online poker, especially on college campuses, we cannot afford to miss this opportunity to protect America's children and consumers. We must take action now," Aftab said.